In praise of unfairness

Back when I started out as an equity analyst, in the days when mobile operators were sexy disruptive growth companies, my boss was very fond of comparing the number of customers per employee at fixed and mobile networks. People from fixed networks used to complain about this comparison, saying that it was unfair, because they needed lots of people to maintain the copper line network that a mobile network didn't need because it didn't have one.

And my boss would reply "yes, it's an unfair comparison, but it's a relevant one".

I was reminded of this recently when I posted this chart and was barraged with complaints that it was an unfair comparison:

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I also got quite a few complaints about these charts:

The complaint in both cases was that of course smartphone sales are bigger than PCs, but that's unfair - the phone market is just much bigger than the PC market (and the devices are replaced every ~2 years where PCs are replaced every ~5 years). Plus, it's unfair to compare PCs with mobile devices because some of the things you do on PCs are hard to do on mobile devices (at least for now). 

These objections were quite correct  - the comparison is unfair. But it's also relevant. Mobile is now around half of all time spent online in developed markets and will be the dominant global consumer computing platform of the next decade or two. And the sheer scale of the smartphone businesses is driving a reshaping of all the dynamics of the technology industry, while its supply chain is enabling all sorts of new segments that would never have been possible before - drones, wearables, VR, micro-satellites, internet-of-things devices and lots of other things besides.

Hence, another deeply unfair but deeply relevant chart: Microsoft's share of the sum of all personal computing devices: Windows PCs, Macs, iOS and Android devices and Windows Phones (I could arguably include games consoles in here - my inclination is not to, but it wouldn't change the chart noticeably).  

In case it isn't obvious by now, these charts are meant to be unfair - that's the point. Unfair but relevant comparisons are the most interesting and important kinds. An unfair comparison generally means an unfair advantage, and this isn't the Olympics - unfair is goodCustomers don't care if a company's advantage is unfair. Investors don't care. Unfair advantages are often the best kind. They are something that flows structurally from the reason why your business is going to change everything - they flow from a technology change you are building on or a change in market dynamics or consumer behaviour that you're riding, and that your competitors cannot address. Disruption is unfair. Mobile's disruption of PCs and the PC internet is entirely unfair - it's the unfairness of differences like the replacement cycle and subsidy model (amongst many others) that makes it possible. 

So, here are some more unfair comparisons:

  • Apple and Android could enter the smartphone business with Unix-based platforms that leveraged modern hardware while Nokia, RIM and Palm were working with software platforms premised on the hardware constraints of the late 1990s and early 2000s. 
  • Apple can sell $600 phones for (what look like) low prices due to the operator subsidy system, while PCs have to be sold at full price. 
  • WhatsApp sends as many messages as the global SMS system (approximately) with only a few dozen engineers
  • Skype can provide free phone calls because it doesn't have to maintain a physical network
  • SAAS businesses can be much more efficient than packaged software businesses
  • Amazon has a bigger selection and lower costs than any store
  • Airbnb has a wider selection of places to stay than Hilton
  • Android is more fragmented than iOS
  • Android outsells iOS

One of the strands within this is the concept of getting something for nothing. Most obviously, WhatsApp and Skype use the infrastructure others built at great cost to offer voice or messaging for free. But really, that applies to any internet business. That's, well, unfair.